Kotak Institutional Equities has upgraded Coforge to ‘Buy’, setting a target price of ₹9,000 following the company’s announcement of a major 13-year contract with Sabre, valued at $1.56 billion in total contract value (TCV). The brokerage sees this as a pivotal deal that strengthens Coforge’s position in the Travel, Transportation, and Hospitality (TTH) vertical.
Key Takeaways from the Deal:
• Revenue Boost: The contract could drive front-ended revenue growth, enhancing Coforge’s top-line momentum in the near term.
• Sales and Solutioning Strength: The deal highlights Coforge’s strong sales execution capabilities and domain expertise in the TTH sector, which could lead to further long-term opportunities.
• Associated Risks: Despite the positive outlook, Sabre is currently in a transition phase, with a weaker financial standing, which introduces potential execution risks.
Financial Adjustments and Stock Performance:
Kotak has trimmed its EBIT margin estimates by 50-60 basis points, leading to a 4-5% cut in EPS estimates. However, the brokerage finds the recent 18% decline in Coforge’s stock price over the past three months as an attractive entry point for investors.
With this landmark deal positioning Coforge for sustained growth, Kotak Institutional Equities sees significant upside potential and recommends accumulating the stock at current levels.
